Vornado Realty Trust CEO Steven Roth heartily embraced the Hudson Yards megaproject as being good for business, saying that rather than being the 800-pound gorilla in the Manhattan office market, it had been a boon for the real estate investment trust’s leasing efforts in the Penn Plaza area.
“We benefited enormously from the activity that’s been created around Hudson Yards,” Roth said during the company’s second-quarter earnings call, “and we are rooting mightily for its success.”
Penn Plaza — Where Vornado Owns A Large Office Portfolio Including One Penn Plaza – had seen a windfall from what Roth said was a shift toward thinking of the far West Side of Manhattan as the next growth area, which had come about because of the Related Companies’ major development.
“Plus, their price point is $30 above ours, and is sucking our price point up,” he added.
Strong leasing activity in the REIT’s New York portfolio combined with some savvy asset dispositions led to an increase in year-over-year profits in the second quarter, Roth said. The company signed 45 leases for a total of 546,000 square feet of space in the New York market, with activity driven by “creative class” tenants such as Facebook – which took just under 100,000 square feet at 770 Broadway, according to David Greenbaum, head of the REIT’s New York operations.
The Facebook deal also led to another major new tenant in big data firm Rocket Fuel, which took 50,000 square feet at 100 West 33rd Street, Greenbaum said. Rocket Fuel will pay rents in the mid $40s per square foot for the third floor of the building in a ten-year deal, according to data from CompStak.
The REIT also saw in uptick in high-end lease deals, including a 30,000-square-foot deal at 280 Park Avenue – which it owns jointly with SL Green Realty — for more than $115 per square foot, and four deals at 350 Park Avenue for north of $100 per square foot.
“Barfing out some of that sublease space at cheapy pricing” had helped Vornado once again command premium prices for direct space, Greenbaum said, referring to the decreasing availability of below market-rate sublease space.
Roth — after introducing the REIT’s new chief financial officer Steve Theriot — reiterated his commitment to be a net seller of assets in 2013, part of the REITs strategy to simplify its business. Highlights of the second quarter included the closing of the sale of mortgage special servicer LNR for $1.05 billion, for which the REIT received net proceeds of $241 million for its 26.2 percent stake, and a decrease in its stake in J.C. Penney department stores
Vornado executives also touched upon the progress of some of the REIT’s major New York investments, including the Marriot Marquis retail signage project in Times Square, which is going into construction into the fourth quarter this year, and the renovation of 280 Park Avenue, at 48th Street, which will be completed in the third quarter of 2014.